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Financial Services offered by HSIIDCThe scope of financial services provided by HSIIDC has been enlarged over the years keeping in view the ever-growing needs of industrial sector. The services now being provided include:
Who is Eligible?Only Corporate entities having manufacturing set up or intending to set up one in the State of Haryana are eligible for availing financial assistance from HSIIDC. Policies and Procedures relating to General Term LoanThe policies and procedures relating to various services offered by the Finance Division of the Corporation are discussed hereinafter. TERM LENDING What can be financed ? The unit should envisage setting up manufacturing facilities in the State of Haryana. The service sector entities like Hotels, Hospitals, Warehousing etc. are also considered eligible for financing. General Term Loan Maximum exposure per company : Rs. 2500.00 lakh (to a single company under all schemes) irrespective of size of project Minimum Security Margin : 25% Promoters Contribution : 30% Debt Equity Ratio: 1.5:1 Note: The acceptability level of Debt Equity Ratio depends on the risk perception in each case. Also, for the purpose of Debt Equity Ratio, the equity will consist of share capital, free reserves, preference share capital redeemable after ten years and interest-free unsecured loans from promoters/directors etc which are not to be withdrawn during the currency of the loan.
Rate of interest The rate of interest applicable (floating) as on date is 12% with rebate of 1% on timely payment for general term loan. However, for specific scheme, the interest rate have been indicated under the respective heads of specific schemes
SERVICE TAX & PROCESSING CHARGE ON TERM LOAN Processing Fee : 0.20% of the loan amount The processing fee for term loan cases of more than Rs.5.00 Crores, the applicants can deposit 50% of the processing fee at the time of submission of application and balance 50% of the processing fee is required to be deposited before issue of sanction letter Service Tax : 12.00% of the processing fee and Education Cess on Service Tax is 3.00%. After the case has been accepted and appraisal initiated, the processing charges are not refundable. However, if the application is withdrawn after the acceptance of case but before starting the appraisal, the processing charges are refundable after retaining service tax & lump-sum fee of Rs. 5000/-. COLLATERAL SECURITY The Term Loans extended by the Corporation are secured by way of mortgage of primary security. However, the Collateral Security is obtained to further secure the loan and its quantum depend on the risk preception. VERIFICATION AND VALUATION OF COLLATERAL SECURITY: -- The corporation has a panel of valuers for carrying out verification and valuation of collateral security. Further it is to be cross checked by the officers of the Corporation. Following information will be required from the client:
HOW TO GO ABOUT AVAILING FINANCIAL ASSISTANCE? Interaction with the 'Client' starts with the receipt of Application Form (both printed and on floppy) which is available on payment of Rs.100/- at Head Office and/ or Branch Offices of the Corporation. The applicants may downloads the application form from the website which is available under download section on homepage. However, the applicants are required to pay demand draft of Rs.100/- in favour of HSIIDC Ltd. payable at Panchkula/Chandigarh at the time of submission of application along with processing fee Following basic information is required at this stage:
The Application Form, duly filled in along with a copy on floppy and
complete with above information, may be submitted at Head Office or any Branch Office of
the Corporation. The ACCEPTANCE OF PROPOSAL FOR APPRAISAL After receipt of application, the proposal is placed before the Screening Committee, which consists of senior officers of the Corporation. The promoters are also required to be present in this meeting. The objective of this meeting is to interact with the promoters and also to examine as to whether the proposal can be accepted for detailed appraisal. This stage takes about a week’s time. ACCEPTANCE OF PROPOSAL FOR APPRAISAL DURING BUSINESS MEET The Corporation organises Business Meets at different locations throughout the year. The event is generally notified through press in advance. Basic information as per the prescribed format is required for scrutiny of proposals during the Business Meets. The proposals accepted at Business Meets are straightway allotted for appraisal after approval of the Managing Director. DETAILED APPRAISAL OF THE PROPOSAL After a proposal is accepted for appraisal, the detailed appraisal is carried out by the officer(s) of the Corporation to assess the technical feasibility and financial viability of the proposal. Among other things, the Appraising Officer(s) focus on the following points:
After the appraisal, the proposal is placed before the Advisory Committee which consists of members from within the organisation as well as outside experts. This Committee looks into various aspects of the appraised project, and its strengths & weaknesses to assess and determine the technical feasibility and financial viability of the proposal. SANCTION OF LOAN Once the proposal is cleared by the Advisory Committee, it is placed before the authority competent to sanction the loan. The time taken from the receipt of application till sanction of loan is about two months subject to expeditious and timely receipt of complete information from the applicant. DISBURSEMENT OF SANCTIONED ASSISTANCE The process of disbursement of term loan starts with the
acceptance of terms & conditions of sanction by the borrower as conveyed in the
Sanction Letter and deposit of Imprest Money and Up-front Fee. The imprest Money is kept
as an advance and its objective is to meet the expenses the Corporation may have to incur
during Monitoring and Follow-up. Presently, the Imprest money is charged @ Rs. 25000/- in
loan cases up to Rs. 150 Lakh and Rs. 35000 in loan cases above Rs. 150 lakh. The
objective of charging Up-front Fee is to meet the commitment cost of funds during
disbursement stage. The rates at which up-front fee is charged are: @ 0.5% of the loan
amount. Other requirements for first disbursement are as under: Legal Documentation: Legal Documentation precedes any disbursement. The details of Legal Documents required to be executed is supplied immediately after sanction. However, legal documents/resolutions required before disbursement are briefly explained hereunder:
General body resolutions under section 293(1)(a) to mortgage the assets of the company and under section 293(1)(d) regarding borrowing powers. Board resolutions to approve loan application to HSIIDC, to accept terms and conditions of loan and authorising Directors to sign loan agreement, hypothecation deed, to open special current account , resolution to execute Tripartite Agreement with other joint lenders for creating pari-passu charge on fixed assets of the company, if applicable, and other documents under the common seal of the company. ii Other documents
LOAN UNDER EQUIPMENT FINANCE SCHEME (EFS) Eligibility Criteria The financial assistance under this scheme is available to the existing profit-making companies for acquiring machinery & equipment for expansion/ modernisation/ balancing. The company should satisfy the following eligibility norms to be covered under the scheme.
Financing Parameters
Service Tax & Processing Charges Procedure is same as applicable under General term loan Penalties: In case of any default, the rate of interest applicable to general term loan is chargeable for the balance loan amount and it becomes the documented rate of interest for all intents and purposes. In addition, penal interest is charged @ 3% p.a. over and above this revised documented rate on the defaulted amount for the period of default. HOW TO GO ABOUT AVAILING FINANCIAL ASSISTANCE UNDER THIS SCHEME The Applicant is required to submit Application on the prescribed proforma which is available without any payment at Head Office and Branch Offices of the Corporation. The Application, along with processing charges & Service tax may be submitted at Head Office or Branch Office or in the Business Meets, which are organised from time to time along with the following information:
ACCEPTANCE OF APPLICATION The proposal is analysed with main focus on past performance of the unit and the advantages the proposed equipment will provide in its operations. It is accepted for appraisal immediately if it fulfills the basic parameters laid down in the scheme. APPRAISAL A quick appraisal is carried out with special emphasis on the following points:
VERIFICATION AND VALUATION OF COLLATERAL SECURITY Procedure is same as under General Term Loan. SANCTION A decision with regard to sanction of loan is taken by the Managing Director on the recommendations of the Advisory Committee. The entire process takes about one month after receipt of requisite information. DISBURSEMENT OF SANCTIONED ASSISTANCE The process of disbursement of EFS loan starts with the acceptance of terms & conditions of sanction by the borrower as conveyed in the Sanction Letter and deposit of Imprest Money and Up-front Fee. The objective of Imprest Money and Up-front Fee has been explained earlier under the General Term Loan Scheme. Other requirements are given as under: Legal Documentation: The details of Legal Documents required to be executed is supplied immediately after sanction. However, legal documents/ resolutions required before disbursement are briefly explained hereunder:
Letter of CreditThe Corporation has made arrangements with some Commercial banks for opening Letter of Credits for the purchase of machinery from India or abroad against term loan. This scheme aims at reducing the efforts of the client to approach the bank to open the Letter of Credit, which is a de-novo process, after the sanction of loan from HSIIDC. Margin Minimum 15% against disbursement eligibility and 25% on the balance amount of Letter of Credit. However, the Corporation ensures tie-up of total funds required for retiring the Letter of Credit. Service Charges The Corporation levies service charges which are shared with the Commercial Banks through whom the Letter of Credit is opened. The HSIIDC’s charges are comparable with those of the Commercial Banks in case the Letter of Credit is directly opened through them. The details of charges are as under:
*stands for Foreign Exchange Dealers Association of India, which is a Confederation of Foreign Exchange Dealers for deciding various charges on services provided by the members. PROCEDURE FOR OPENING OF LETTER OF CREDIT Following information is required for opening the Letter of Credit:
Where the amount of Letter of Credit is not covered by the eligibility of disbursement, following additional information is required:
Letter of ComfortThe Corporation also issues Letter of Comfort in favour of Commercial Banks to facilitate opening of the Letter of Credit by the latter, in case the client so wishes. Since it amounts to commitment of funds by the Corporation, service charges @ 0.5% of the amount of Letter of Comfort are charged. The Letter of Comfort is issued on the request of the client and the amount is restricted to the extent of disbursement eligibility.
Working Capital Term LoanAs the very title suggests, the loan under this category is provided for meeting the working capital requirements including shortfall in margin money for working capital. It is a medium term maturity loan. Eligibility : Only those units which have been sanctioned/ disbursed term loan by the Corporation. Limit for Loan:
Financing Parameters
COLLATERAL SECURITY :
HOW TO GO ABOUT AVAILING FINANCIAL ASSISTANCE UNDER WORKING CAPITAL TERM LOAN The Client is required to submit an Application on the letter-head of the company along with Processing Charges & Service tax. The Application may be submitted at Head Office or Branch office or in the Business Meets, which are organized from time to time, along with following information:
After receipt of proposal, the case is placed before the BPC for acceptance for appraisal. Constitution of the BPC has been discussed earlier. The proposals accepted in the Business Meets chaired by MD/HSIIDC are not subject to ratification by BPC. APPRAISAL OF THE PROPOSAL A brief appraisal is carried, which is aimed at the following points:
VERIFICATION AND VALUATION OF COLLATERAL SECURITY Procedure is same as under General Term Loan. DISBURSEMENT OF THE SANCTIONED ASSISTANCE The process of disbursement of loan starts with the acceptance of terms & conditions of sanction by the borrower as conveyed in the Sanction Letter and deposit of imprest money and Up-front Fee. The objective of Imprest Money and Up-front Fee has been explained earlier. Other requirements are as under:
b. Other requirements:
Line of Credit SchemeUnder this scheme, a Line of Credit, valid for one year is granted to existing borrowers who have created first charge on its fixed assets in favour of the Corporation, for purchase of separately identifiable machinery/ equipments obviating appraisal procedure and giving flexibility in identifying the machinery/ equipments at a later stage. Eligibility Conditions:
Financing Parameters:
Disbursement of Sanctioned Assistance:Procedure is same as under Equipment Finance Scheme. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repayment period | 3-1/2 to 5-1/2 years with initial moratorium period of 6-12 months |
| Promoter's contribution | Minimum 30% |
| Debt Equity Ratio | 1.5:1 (including proposed loan) |
| Rate of interest | As applicable to normal term loans. |
| Processing and up front fee | As applicable in normal term loans cases. |
Security:
- Demand promissory note.
- Extension of first charge on fixed assets of the company with asset coverage ratio (including proposed loan and fixed assets) of not less than 1.5 times.
- Exclusive charge on fixed assets to be acquired under Corporate Loan Scheme.
- Security margin not below 25%.
- Personal guarantee of promoters.
DISBURSEMENT OF SANCTIONED ASSISTANCE :
Procedure is same as under General Term Loan.
Scheme For Financing Commercial Complexes
Sensing the needs of borrowers, HSIIDC has introduced a Scheme for construction of Commercial complexes. The assistance under the scheme is provided for:
- Acquisition of land and construction of building thereon.
- Interior decoration, air conditioning, communication facilities for commercial complexes and shopping malls.
- Acquisition of racks for storage, weigh bridges, conveyor system, lift for show rooms, departmental stores, sales outlets etc. Products for sale will not be considered for financing.
- In case of existing functional commercial complexes, renovation cost and cost of acquisition of additional establishment could also be considered for financial assistance.
- Any other required facilities connected with the commercial complexes, can also be considered for financing.
The land should be in name of company or its promoter and same be mortgaged with the Corporation.
Financing Parameters
Maximum assistance |
Rs. 2500 lacs. |
| Minimum promoter’s contribution | 30% |
| Maximum debt equity ratio | 1:1 |
| Minimum Security Margin | 35% |
| Processing Fee | 0.20% of loan amount |
| Upfront fee | 0.50% of loan amount |
| Repayment Period | upto 8 years with moratorium period of 18 months |
| Rate of Interest | 13% p.a floating (Before 1% timely payment rebate) |
Scheme for take over of loans of other Institutioins/ banks
The Corporation has a scheme for take over of loans of other Institutions / Banks, along sanctioning of loan for expansion/modernization schemes of such companies. This will facilitate dealings of the company with one institution, improve the asset quality of the Corporation, while reducing the cost of funds for the borrowers.
The scheme shall be subject to following parameters:-
- All the parameters of general loan scheme such as Debt Equity Ratio, loan limit shall be applicable for this scheme also. The assets coverage ratio for the loan being taken over should not be less than 1.5 times.
- The unit should be in existence and profits at least for the last one years.
The unit should be regular with the institutions/banks from where it has availed financial assistance and the account should have been classified as ‘standard assets’.
The collateral security as may have been given to other institution/banks shall be obtained.
The entire loan should be taken over and loan thus taken over shall be secured by way of first charge on fixed assets of the company .
The payment should be directly released in favour of institution/banks which has extended the financial assistance.
However, this take-over of loans will not be in isolation and shall be resorted to only when company has scheme for additional loan for expansion/ modernisation.
Technology upgradation Fund Scheme for Textile Industry (TUFS)
The Ministry of textile, Govt. of India has announced Technology Up-gradation Fund Scheme for technology up-gradation & modernization in the Textile and Jute Industries to be operative for five years from April 1, 1999. Under the scheme five percentage point on the interest rate actually charged by the identified financial institutions shall be reimbursed on the sanctioned projects.
Scheme for Financing Industrial Infrastructure Industrial Estates developed by HSIIDC & HUDA Purpose:Assistance to be provided under the scheme for the following:
- Acquisition/Purchase of land and construction of building thereon.
- Lifts, Interior decoration, air conditioning, Fire fighting equipments, communication facilities etc. required for the building.
- In case of existing buildings, renovation cost and cost of acquisition of additional establishment could also be considered.
- Any other required facilities connected with the infrastructure projects.
Eligibility:
The land for such infrastructure project should be in name of
company or its promoter and falling with in the HSIIDC/HUDA area and the same be mortgaged
with the Corporation.
The company/concern shall obtain NOC from estate Division of the concerned agency to the effect that the unit is otherwise eligible for leasing as per EMP-2005 and there is no default of the conditions of the allotment.
The company/concern shall undertake that as and when the premises are given on lease, the lease agreement would be drafted to the satisfaction of the Corporation.
The company/concern will open an Escrow account with its bankers whereby the repayment of instalments due to the Corporation will automatically be credited to the Corporation’s account on due dates.
The company/concern shall undertake that the lease agreement would also specifically mention that the unit being leased out stands mortgaged to the Corporation.
Financing Parameters
| Maximum assistance | Rs. 1500 lacs enhanced to Rs.2500 lacs. |
| Minimum promoter’s contribution | 30% |
| Maximum debt equity ratio | 1:5:1 |
| Minimum Security Margin | 35% |
| Processing Fee | 0.20% of loan amount |
| Upfront fee | 0.50% of loan amount |
| Repayment Period | Up to 8 years with moratorium period of 18 months |
| Rate of Interest | 13% p.a floating (Before 1% timely payment rebate) |
Monitoring and Follow up:
Once financial assistance is extended to any client, sharing of information relating to the project is important. The Corporation has a system to follow-up the progress of the case at all stages. Following information, which may be useful to both lender and the borrower, is required to be submitted :
DURING IMPLEMENTATION OF THE PROJECT
Quarterly progress reports of the project are required in the prescribed format.
After Implementation of the Project the client is required to comply with the following:
- Annual renewal of Insurance cover of the assets;
- Submission of half yearly reports (quarterly reports in case of listed Companies) indicating actual performance vis-a-vis projections in prescribed format;
- Submission of audited annual accounts;
- Physical verification of the assets by the officer(s) of the Corporation at least twice in a year;
- Balance confirmation as on 31st March of every year, till the assistance is fully repaid.
- Intimation of change in Directors/promoters, if any
- Annual statement of net worth of guarantors
- Conduct quarterly Board meetings in the presence of Nominee Director
Recoveries:
The Corporation's capability to serve its clients in the best possible manner is dependent upon timely recoveries of its advances to the borrowers. The clients should be aware that their loan accounts are classified in three categories as per the guidelines issued by the RBI. These categories are:-
- Standard Assets
- Sub-standard Assets
- Doubtful Assets
The classification of loan account in any of the above categories and provisioning in lieu thereof is to be done by the Corporation in accordance with the guidelines issued by the RBI from time to time. However, the clients must understand that while the provisions are just nominal in case of standard assets, these keeps on going up with the loan accounts becoming sub-standard and doubtful assets in line with the aging of default as well as realisable security cover available to the Corporation towards repayment of interest and principal amounts. It is, therefore, crucial both for the Corporation as well as the client to ensure that his account does not become a non-performing asset (NPA) and remains in the Standard Asset category.
RECOVERY SCHEDULE
The repayment of principal and interest thereon is required to be made in quarterly installments falling due on 30th April, 31st July, 31st Oct. and 31st January in a financial year (these dates may be different in old cases). The rationale behind recovering the due amount on a quarterly basis lies in the Corporations liability to service the loans/ refinance it avails from banks/ refinancing institutions for its clients.
The repayment schedule of installments is worked out on the basis of tenure of the loan at the time of first disbursement. However, there are also cases where a client may not need to avail some portion of the sanctioned loan and he may be in a position to complete his project without really needing the balance unutilised assistance. In such cases, the client will be allowed the benefit of re-fixation of his installments only once in accordance with the amount of loan actually disbursed and the tenure of the loan subject to his furnishing an undertaking that the balance unutilised component of the loan be cancelled. However, in all such cases, the amount paid by them towards initial installments till the date he makes such request will not be recalculated for re-fixing the installment schedule. In other words, while revising the repayment installment amount, retrospective benefit will not be admissible.
ACCOUNTS
Normally, the client is supposed to know the amount of installment falling due on a particular date as per the repayment schedule fixed at the time of first disbursement or re-fixed subsequently and he is expected to adhere to the repayment schedule. However, for the convenience of the client, the Corporation also has a system whereby the client would be served with a Demand Notice just before repayment of the installment amount falls due. Similarly, he would also be receiving his account statement after realisation of the credit of the payment made by him. However, the client may please note that any failure on the part of the Corporation to send such a Demand Notice would not provide him with the plea that he could not make the payment as he had not received such Demand Notice. The account statement is sent on a regular basis.
TIMELY CREDIT TO HSIIDC's ACCOUNT
The borrowers may please note that the repayment to HSIIDC is taken into account on the day the amount gets credited to the HSIIDC's account and not on the day he issues a cheque/ draft payable towards such repayment. Hence, the clients would be well advised to send their drafts/ cheques well in time if they want to avail of the interest rebate or save on penal interest for the period of delay involved in realisation of the amount to the HSIIDC's account. The borrowers are also advised that they must issue the cheque/ draft/ pay order payable at the station where it is sent for realisation i.e. branch office or head office, whatever the case may be.
REBATE & PENALTIES
- Rebate:- The Corporation has a scheme to allow interest rebate which is linked with the timely repayments of interest and principal. The rebate presently being allowed is 1% on interest rate and the benefit of this is extended in the fourth quarter, after watching the regularity of payment of interest and principal for three quarters. The scheme of interest rebate is subject to review from time to time. While the interest rebate may be lowered at some point of time, it may as well be discontinued altogether at some time.
- Penalties:- The objective of penal interest is to act as a deterrent for default and encourage timely payments. In case of default, penal interest @ 3% p.a. over and above the documented rate is charged on the defaulted amount for the period of default.
OTHER STRINGENT RECOVERY MEASURES
In cases of consistent and deliberate defaults, and where the Corporation has failed to effect its recoveries after exhausting all persuasive methods, the Corporation is competent to proceed under Section 29 of the SFCs Act and resort to coercive action there under. It may be clarified here that invoking SFCs Act for the recoveries is done as a matter of last resort but let the borrowers also note that the assets of the company can be taken over under the provisions of this Act and disposed off for recovery of its dues.
Pre-payment of Term Loan or Any Other type of Financial Assistance:
Generally, pre-payment of loans is discouraged. This is because the refinancing institutions from whom HSIIDC raises resources also do not accept pre-payments. Moreover, it upsets the financing plans of the Corporation besides resulting in higher costs very often. Wherever the Corporation agrees to accept pre-payment of loan, the premium equivalent to the net present value (NPV) of differential in rate of interest for the un-expired period discounted at prevailing rate of interest is charged. However, acceptance of pre-payment is at the sole discretion of the Corporation.
Generally, rescheduling of loans is discouraged and not allowed unless there are genuine and compelling reasons. Wherever it is agreed in principle, the request of the borrower must be supported with the following documents:
- Financial statements for the last two years and current year;
- Projections for the remaining period of loan;
- Reasons for seeking rescheduling; and
- Proposal for rescheduling.
Rate of Interest in case of Re-scheduling
- First Re-scheduling: Documented rate or the rate prevailing at the time of acceptance of the rescheduling proposal, whichever is higher.
- Second Re-scheduling: 1% above the documented rate or 1% above the rate prevailing at the time of rescheduling, whichever is higher, on the rescheduled amount for the period of rescheduling.
- Re-scheduling beyond currency period: 0.5% above the rate of interest applicable for the respective rescheduling(s) within the existing currency period for the loan as mentioned above, for the extended period.
One Time Settlement (OTS) Policy of HSIIDC
One time settlement will be done in all loan ( term loan/ working capital term loan/ bridge loan ) cases which are categorised either Doubtful/loss on the terms and conditions detailed hereunder:-
- Wilful defaulters as detailed subsequently shall not be entertained under these guidelines for the settlement of loan account.
- The categories of loan accounts under the guidelines are defined as under and basis of status of loan account would be taken on the date as and when the party approaches for settlement of loan account.
DEFINITION OF DOUBTFUL ACCOUNT AS PER THIS POLICY:-
Doubtful loan account is one, where the principal remained overdue for a period exceeding two years.
Category |
Benefits Permissible |
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1.(a) |
Doubtful loan account (Category-A) |
Accounts may be settled by waiving off entire penal interest plus 25% of component of compounded interest. However, the waiver shall not exceed 25% of total outstanding. |
Where the loan account has remained doubtful for less than three years. |
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(b) |
Doubtful Loan Account (Category-B) |
Accounts may be settled by waiving off entire penal interest plus 50% of component of compounded interest but waiver should not be more than 50% of total outstanding. |
Where the loan account has remained doubtful for more than three years but less than five years. |
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(c) |
Doubtful Loan Account (Category-C) |
Accounts may be settled by waiving of entire penal plus 100% component of compounded interest |
| a | Where the loan account has remained doubtful for more than five years. |
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| b | However, the amount recoverable shall not be less than 90% of realisable value of primary and collateral security available with the Corporation in all the above categories. The assessment shall not be more than six months old on the date of submission of settlement proposal. |
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| (d) | Doubtful/Loss Loan Account (Category-D) | Accounts may be settled by waiving of
entire penal plus 100% component of compounded interest and 50% of
simple interest. However, the waiver should not exceed the interest outstanding. |
| Under this category, those cases will fall where the primary and collateral securities have already been disposed off by the Corporation. There will be no verification of assets and the eligibility under the scheme will not be linked with personal assets of borrowers/guarantors. | ||
| The amount of waiver under the scheme shall be restricted to the amount payable by the party and would be applicable to cagegory 'A', 'B', 'C' and 'D' of the One Time Settlement Scheme only. | ||
| II. | Units in possession of the Corporation for over three years but could not be disposed off inspite of four attempts and no other security is available. | Accounts may be settled by charging principal and misc. alongwith normal refinance rate or equivalent thereto prevailing at the time of loan advance. |
| III |
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The units falling in either of the three categories approaches for settlement, the accounts may be settled by allowing the benefit of waiver of penal interest provided the entire outstanding is liquidated within a period of six months from the date of settlement. Such benefit, is however, to be restricted to the extent of interest outstanding and no portion of principal amount shall be waived off. |
| IV | LOSS PORTFOLIO/ R.C./R.C. STAYED CASES | |
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Principal plus misc. and 1/3rd of the simple interest in terms of Mortgage Deed on the amount outstanding to the recovered and no verification of personal assets may be insisted upon. An affidavit about the present means of the promoters is to be given by promoters/guarantors. | |
| 1 | Non-Applicability of OTS to Wilful defaulters. As per the guidelines of the RBI the following cases will fall under the definition of wilful defaulters:-
The RBI guidelines further state that the identification of the wilful defaulters should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as wilful must be intentional deliberate and calculate. |
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| 2 | The financial statements/working results may be thoroughly scrutinized and the borrower company/unit will be considered as wilful defaulter if it has sufficient cash accruals and the interest has been charged to its profit & loss account but has not been paid inspite of cash profits. | |
NOTES AND EXPLANATION.
- Borrowers interested to avail off the benefit under the scheme may apply to the
concerned Branch Manager/ Head Office.
- Calculations of amount payable by the borrowers under the guidelines may be done by
adjusting/appropriating the amount received from the borrowers, amount of sale proceeds of
unit and collateral/additional security first towards misc. expenses, then interest and
thereafter principal amount. Further, in those cases where securities mortgaged to the
Corporation are still in existence, the realisable value of the assets of the unit and
collateral/additional security available with the Corporation should be given.
The case is to be processed after receipt as upfront advance of :-
- 5% of outstanding in normal cases
- 10% of outstanding in possession taken cases;
- 15% of outstanding in possession taken cases where the company wants the possession to be restored immediately
- The amount deposited and will be kept in Sundry Deposit Account and credited to the party's account when the account is finally adjusted as per terms.
All proposals would be scrutinized by a committee comprising of the following:-
- Executive Director, Chairman;
- General Manager (Disbursement & Recovery);
- General Manager (Appraisal)
- Addl.G.M. (Disbursement & Recovery)
- DGM (Disbursement & Recovery)
- DGM (Appraisal)
The committee will give recommendations which would be placed before the BoD for approval.
- Prevailing normal rate of interest from time to time would be charged after expiry of currency of loan.
- Maximum permissible repayment period of the OTS amount will be two years in cases where HSIIDC is the lead institution. However in cases where HFC is the lead institution, repayment period will be restricted to one year. 25% of the total amount worked out would be payable within 3 months & the balance 75%amount in equal quarterly instalments over the repayment period as may be approved and the OTS amount so worked out would carry prevailing normal rate of interest w.e.f. the cut off date on which the OTS amount is worked out.
- In no case principal and misc. expenses amount shall be waived off under these guidelines.
- The relief shall be worked out from the date of last default persisting as per Mortgage Deed by recasting the account as per documented rate of interest.
- The power to grant extension in the payment of settlement amount and condonation of delay subject to payment of interest by the parties for the intervening period shall rest with the Managing Director.
- The benefit under the guidelines will be passed on only after receipt of full amount as per settlement.
Haryana State Industrial and Infrastructure Development Corporation Ltd., OTS Scheme - 2007
1. SHORT TITLE AND COMMENCEMENT:
This policy may be called " HSIIDC OTS Scheme - 2007."
2. CATEGORIES OF ACCOUNTS TO WHICH THIS POLICY APPLY
This policy will cover all the accounts of the borrowers/defaulters of HSIIDC which were classified as NPA accounts which have become doubtful or loss as on 31.3.2004. The policy would also cover NPAs classified as Sub-standard as on 31.3.2004 which have subsequently become doubtful or loss assets.
For the purpose of determining eligibility, the NPA definition would be as per the guidelines of RBI applicable upto the year ending March 31, 2004. Accordingly, NPA means non performing asset account if interest and/or instalment of principal remain overdue for more than 6 months. All accounts where the age of default in instalment of principal and/or interest is more than 6 months, the account would be treated as NPA which could be either a sub-standard/doubtful/loss account in terms of classification guidelines of RBI as prevailing on 31.3.2004, which is as under:
CATEGORY AGE OF DEFAULT Standard 0-6 months
Sub-Standard More than 6 months upto 24 months Doubtful More than 24 months Loss No security available. Likewise NPA definition for leasing accounts would be as per RBI guidelines as applicable for year ending 31.3.2004.
This policy will be applicable to all NPA accounts irrespective of outstanding balance.
The policy would also cover cases pertaining to bridge loans/loan availed against state Subsidy, lease assistance, working capital terms loans, bridge loan against working capital & corporate loans.
The policy will also cover all accounts where the Corporation has taken action under section 29 of SFC’s Act, RC issued cases and also cases pending before Courts/DRT/BIFR. However, in the cases which are pending before the Courts/DRT/BIFR, the borrower shall be required to give an affidavit for withdrawal of the case or obtain consent decree from Court(s)/DRT/BIFR.
The policy would also cover cases where the Corporation had approved settlement under any of the ongoing schemes of the Corporation known as One Time Settlement Scheme(OTS)/under RBI policy as adopted by HSIIDC in 2003 provided the OTS has not fructified and either the OTS has been withdrawn by HSIIDC or the validity period of the OTS has expired. However, cases where OTS is in force, under any earlier policy, will not be eligible to be covered under this scheme.
The policy would also cover cases where orders for winding up have been passed and the official liquidator appointed and also the cases where BIFR has recommended for winding up of the company.
This policy shall not be applicable to willful defaulters as per RBI guidelines which are detailed hereunder:-
- Deliberate non-payment of the dues despite adequate cash flow and good networth.
- Siphoning off of funds to the detriment of the defaulting unit.
- Assets financed have either not been purchased or have been sold and proceeds have been mis-utilized.
- Misrepresentation/falsification of record.
- Disposal/removal of securities without bank’s/HSIIDC's knowledge.
- Fraudulent transactions by the borrowers.
The RBI guidelines further state that the identification of the willful defaulters should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorized as willful must be intentional, deliberate and calculated.
3. SETTLEMENT FORMULA – amount and cut off date
- NPAs classified as Doubtful or Loss as on March 31, 2004
The minimum amount that should be recovered under the policy in respect of compromise settlement of NPAs classified as doubtful or loss as on March 31, 2004 would be 100% of the outstanding balance in the account as on the date on which the account was categorized as doubtful NPA.
- NPAs classified as sub-standard as on March 31, 2004 which became doubtful or loss subsequently.
The minimum amount that should be recovered in respect of NPAs classified as sub-standard as on March 31, 2004 which became doubtful or loss subsequently would be 100% of amount outstanding as on the date on which the account was categorized as doubtful NPA plus interest at 12% p.a.(floating) from the cut-off date till the date of final payment.
- Lease Finance Cases
- In lease finance cases, the minimum amount recoverable shall be based on the date on which the account became doubtful or the date on which the assets of the unit were taken over/repossessed by the Corporation, whichever is earlier. The amount shall be the principal outstanding as on the cut off date as per the capital recovery method plus the actual expenses incurred by the Corporation recoverable from the party upto the date of settlement. The Corporation must restrict the watch and ward as well as other expenses to the extent of interest (prevailing rate) on the principal amount from the date, the amount became doubtful till the date of settlement.
- Further, in those cases of lease finance where the borrowers were given advances to procure machinery, but the machinery was not procured due to mis-utilization of funds and in such cases the date of default may be the date on which the amount was advanced to the party and the corresponding cut off date for the purpose of calculation of settlement amount may be taken two years after the date of disbursement.
- In all lease finance cases, the residual value may be recovered without
interest. This amount shall, however, be over and above the settlement approved, if any.
In cases where the lease accounts are settled under OTS policy, the sale consideration will be 0.50% of the principal amount as per capital recovery method incorporated in OTS amount under OTS policy plus taxes, thereon.
- The prevailing guidelines in respect of appropriation of recovery amount according to which any amount received from the borrower is appropriated first towards miscellaneous expenses then towards interest and then towards principal shall not be made applicable in lease finance cases.
- The term "outstanding balance" shall mean the total recoverable from the borrower as on the cut off date as per documented terms.
- The term "cut off date" with reference to an account means the date on which the account was last categorized as doubtful account and has continuously remained either as such or as a combination of doubtful and loss account since that date.
- The settlement amount as above would be the minimum acceptable amount. However, HSIIDC could negotiate with the borrower to recover more than this amount keeping in view factors like security and disposability of the assets.
4. PAYMENT TERMS
- At the time of making application under this policy the borrowers will be
required to deposit amount equal to 10% of principal outstanding in the account as on
31.03.2006 as up-front. The company shall have option to pay the full OTS amount without
any interest within 60 days from the date of issue of letter.
Alternatively, an amount equal to 25% of the settlement amount shall be payable within one month from the date of approval of settlement by the Corporation, (10% of the amount deposited along with the application shall be adjusted against this demand). The balance 75 percent of the settlement amount shall be paid within one year from the date of approval of settlement by the Corporation in 11 equal monthly installments together with interest @ 12% p.a.(floating) from the date of settlement upto the date of final payment. Interest on the settlement amount shall be required to be paid in 4 quarterly installments.
- Any amount received from the eligible defaulting borrower after the cut
off date will be adjusted towards the crystallized settlement amount provided that in no
case the settlement amount shall be less than principal plus miscellaneous expenses
outstanding.
- Payment terms (Leasing Cases) :- At the time of making application under this policy the borrowers will be required to deposit amount equal to 10% of principal as per Capital Recovery Method as on cut off date as up front. The modalities for balance payment in case of leasing cases will remain the same as in term loan cases.
5. SANCTIONING AUTHORITY
The Sub-committee constituted by the Board for approving OTS in dis-investment cases shall also be the competent authority to take decision on the Compromise Settlement of Chronic Non-Performing Assets as per the provisions of this policy. A quarterly report in respect of cases where OTS has been done will be placed before the BOD for information. In case OTS is done outside the provisions of this policy, the matter shall be placed before the Board of Directors for decision.
6. EFFECT OF THIS POLICY ON CRIMINAL LIABILITIES
The settlement under this policy shall be without prejudice to any criminal liability that may arise due to any competent enquiry/investigation.
7. DEVIATION/RELAXATIONS ONLY BY BOARD
The Board of Directors shall be competent authority to grant any relaxation in this policy on case to case basis.
8. INTERPRETATION OF THE PROVISIONS OF POLICY
If any question arises relating to the interpretation of any of the provision of this policy, it shall be referred to the Board of Directors of the Corporation for decision and the decision of the Board of Directors of the Corporation shall be final.
- In the event, any of these conditions are not fructified, the benefit of this scheme will be forfeited and the money received under this scheme shall be considered as if the same was received in the normal course under the account.
- The Corporation shall have a final right to accept or reject any settlement proposal made under this policy with or without assigning any reasons.
The Scheme will remain open upto 31.12.2007 for receipt of applications from borrowers.
PRE-CONDITIONS FOR ISSUE OF SECOND/SUBSEQUENT CHARGE
The Second and Subsequent Charges are generally required by the clients in favour of Commercial Banks against their working capital limits. The Client is required to comply with the following:
- Request letter indicating the purpose of the charge;
- The unit should not be in default with the Corporation;
- Where the charge is required in favour of the bank for working capital, a reciprocal consent of the bank ceding second charge against current assets in favour of HSIIDC is required;
- Copy of the sanction letter of the Bank;
- For the purpose of second charge on fixed assets in favour of the Bank and creating second charge on current assets in favour of HSIIDC, a tripartite agreement involving the company, the HSIIDC and the concerned Bank is executed.
H ISSUE OF NO-DUES CERTIFICATE AND RELEASE OF SECURITY DOCUMENTS: --
For issuing of 'No Due Certificate', all the dues of the Corporation should have been paid.
For release of security documents, there should not be any outstanding dues of the Corporation and also the 'No Due Certificate' from the Institutions in whose favour the pari-passu charge/ second / third or subsequent charge has been issued, should be submitted.
SCHEME FOR EXTENSION IN CURRENCY IN LOAN ACCOUNTS FOR 5 YEARS.
- Eligibility Criterion:
- Only NPA accounts, as on 31.3.2006, shall be covered under the scheme & and also all restructured A/c's as on 31.3.06.
- The validity of the scheme shall be upto 31.12.2006.
- The Scheme will be applicable even in those cases where the currency already stands expired.
- The accounts should have run for minimum three years.
- Scheme:
- The entire penal interest shall be waived.
- The penal interest be waived from the date of last continuous default and the same should be restricted to the interest outstanding as on date, in no case the principal amount be waived.
- The party will pay 25% as down payment of defaulted amount after excluding penal interest.
- The balance 75% of defaulted amount shall be paid in five years in quarterly installments.
- The defaulted overdue amount may be treated as a "loan against overdue" at the present rate of interest including rebate as per policy.
- Security:
- In cases where the value of primary/collateral securities is equivalent to the loan outstanding after waiver of penal interest and down payment of 25% of defaulted amount, no collateral security will be insisted upon. However, in cases where there is a gap between the outstanding and the value of primary/collateral securities, the company will give collateral security equivalent to the gap.
In case the borrower does not remain/become regular at the expiry of one year, then benefit so given shall be withdrawn.
Units available for sale
To recover its dues, Corporation takes over the assets mortgagged to it u/s 29 of SFC's Act/Court/AAIFR/BIFR and sell them on 'As is Where is' basis. For information of interested parties the list of such units is given below:
List of Industrial units/properties, takeover by HSIIDC u/s 29 of SFCs Act for sale
Public Deposit Scheme
"No More Public Deposits Accepted by HSIIDC"
HSIIDC